Last week, Shelby Bonnie, the CEO of Whiskey Media, co-founder of CNET, and former IAB chairman, wrote an article calling for the demise of CPM pricing in online advertising, and was clear that CPA and CPC pricing have a role, but that there is something more for successful display advertising. Among the many insights in the article, was the age old adage, “you get what you pay for” and, by Shelby Bonnie’s estimation, if you place a media buy with CPM pricing, that means you are buying impressions…which may not be what you really want. In Adify’s experience, brand marketers want their creative to have impact with an engaged audience, and to build positive awareness of their brand. They want this because they know the lasting impact positive brand awareness ultimately has on sales. What they don’t want is their creative to appear on sites cluttered with ads, and with sub-par content.

The issue Shelby Bonnie brings up is that if publishers believe advertisers only care about impressions, then that will dictate the structure of their sites. The unintended consequence of the predominance of CPM pricing is that many publishers gear their sites to maximize impressions. This is often done by increasing the number of ad spaces on the site, as well as requiring their audience to go through multiple page visits to access the content they are interested in.

This assessment is true, but to varying degrees. For example, it is easy to picture how publishers who rely on blind ad networks as their primary revenue source can be much more prone to fall prey to maximizing impressions at the cost of content than top tier publishers or publishers that are members of transparent, premium ad networks. The premium vertical ad networks built on Adify technology are owned and operated by major media companies and venture backed entrepreneurs who value their brand every bit as much as the premium advertisers they sell to. Allowing a site into their network with nothing more than lousy content surrounded by ads is as unacceptable to a premium network owner as it would be for a premium advertiser to run their creative on those sites. By valuing brand safety, premium network owners and advertisers may mitigate some of the negative symptoms associated with CPM pricing.

While buying from a premium ad network has advantages over buying from a blind one, that alone is not the end-all-be-all solution for brand marketers. If we, as an industry, want a landscape where our value to advertisers is as defensible as TV and Radio, we will need a better basis than CPM to measure campaign efficacy. Adify Media offers reporting on interaction, engagement, and brand lift, but ultimately these metrics are used to show the value of the impressions we sell rather than used as the actual cost basis for the campaign.

 If what we really want is systemic change that would transform the online landscape by increasing alignment in what publishers are rewarded to produce, and what media buyers want to buy, we do need to think about radical change. To that end, replacing CPM pricing with a new pricing system is certainly worth exploring.

Currently, Atlas Institute is exploring a model that improves upon traditional CPA/CPC models. While traditional CPA/CPC models attribute all credit to the impression that leads directly to the conversion, Atlas Institute’s model aims to attribute credit across all impressions that influenced the conversion. After a conversion, this model maps where the customer engaged with the ad prior to the conversion, and distributes credit proportionately amongst all sites that displayed that ad. If this model could be expanded beyond Atlas, to our entire industry, it could be a viable replacement for the CPM paradigm. The obvious drawback is that the engagement mapping model does not account for offline conversions, organic search conversions, or conversions coming from customers that clear their cookies prior to making a purchase.

Pointroll, Eyeblaster and others have contributed advancements in the ability to track more detailed interaction metrics. Moving towards a model that rewards sites based on their users’ interaction rates and times could prove to be an improvement over CPM pricing, especially if it could be expanded beyond rich media ad units. Vizu’s Ad Catalyst offers measurement of how online display ads influence brand recognition and perception. Incorporating brand lift as a metric to base pricing on could be interesting as well. The bottom line is that creative solutions providing demonstrable and defensible value to online media buyers are out there, but have not yet resulted in an industry-wide movement to change how we price online media.  We believe the exploration of these alternatives should be a dialogue within our industry, and we’re always interested to hear ideas that would move our industry towards being a more effective and profitable medium.

 What do you think the pricing model should be to align the value of display advertising with the price? 

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